How we got here

Troy Stangarone

Shortly after Congress passed the Inflation Reduction Act, a Korean colleague expressed frustration at the unfairness of the law, which was initially seen as favoring U.S. firms over Korean and other foreign firms. They went on to note that the United States needed Korea and its allies to be robust economies so they would be good partners.

In principle, I don’t disagree. The Inflation Reduction Act’s provisions limited electric vehicle (EV) subsidies to vehicles produced in the United States, and over time, to those with an increasing amount of U.S.-produced content. The Biden administration did work with allies to reduce these burdens, but at the time, Korea only produced EVs domestically, and the concern was that it would be placed at a competitive disadvantage.

The idea that the United States needs economically robust allies is also straightforward.

However, the comment seemed to miss a broader point that is relevant for today. If Korea and other U.S. allies want a stable, dependable ally that provides international leadership in crises, a vibrant market for their exports and a partner they can be confident will live up to its security guarantees, the United States needs a robust economy and stable politics. This point seems to be missing from the discussion.

While the Biden administration’s Inflation Reduction Act, the CHIPS Act and Bipartisan Infrastructure Act were well-intentioned, they were never going to be sufficient to create the type of economic growth in a short period of time that might tamp down some of the extremes that had been growing in U.S. politics.

It’s easy to see President Donald Trump as the reason for the changes occurring in U.S. policy, but the second Trump administration is an outgrowth of deeper trends rather than the cause of the policy shifts we are seeing today.

To understand this moment and how to achieve better outcomes, it’s important to consider how we got here. While there is no one definitive reason, there are three that likely played a significant role — declining faith in government and institutions, declining manufacturing and wage stagnation and illegal immigration.

Since Watergate, the American public’s trust in its government and institutions has been on the decline. Pew Research, which maintains long-term polls on trust in government, has found that American trust in government declined significantly during the Vietnam War under Lyndon Johnson, but didn’t fall below 50 percent until the Watergate scandal of Richard Nixon. It has largely stayed there except for a brief period around the terrorist attacks of 9-11. Since former President Barack Obama's administration, it has fluctuated between the mid-20s and the teens.

American trust in institutions does not fare much better. Since 1979, Gallup has done polling on trust in institutions. The high-water mark was 1979 at just 48 percent. After the 2008 financial crisis, trust in institutions fell into the 30s, but declined into the 20s over the last few years.

This lack of faith in government and institutions has likely been deepened by the failures of the global financial crisis and the wars in Iraq and Afghanistan.

Economic difficulties have also played a role in shifting attitudes in the United States. Manufacturing jobs in the U.S. peaked in June 1979 at 19.6 million, but declined sharply with China’s entry into the WTO in 2001. Coupled with wage stagnation that also began in 1979, millions of Americans have lost good-paying jobs and faced increasing economic challenges as their high-wage manufacturing jobs were replaced with lower-wage service jobs.

These economic frustrations filtered into politics. Work by David Autor from the Massachusetts Institute of Technology has shown that Congressional districts most impacted by job losses from China also began voting for more extreme Democratic or Republican candidates.

Lastly, immigration has become a more salient issue in U.S. politics. Estimates from the U.S. Department of Homeland Security suggest that there are likely 11 million illegal immigrants in the United States. This is up from 3.5 million in 1990 and has fed a sense among some Americans that leaders have lost control of the country.

Each of these issues and a failure by politicians to deal with them has made Americans more receptive to politicians such as Trump offering to break the system and provide solutions. It has also opened the door to the idea that U.S. allies have not treated the United States fairly.

Korea and other U.S. allies have an interest in how the United States functions. While there is little they can do to improve Americans’ trust in their own institutions or address illegal immigration, it is important for political leaders outside the United States to understand how we reached this point to inform their decisions. The Trump administration is using tariffs to cut deals, but Seoul has agency in the type of deal and how it impacts the relationship in the long term.

Troy Stangarone is the director of the Hyundai Motor-Korea Foundation Center for Korean History and Public Policy and the deputy director of the Indo-Pacific Program at the Woodrow Wilson Center.